Relative Performance, Risk and Entry in the Mutual Fund Industry

Gyöngyi Lóránth and Emanuela Sciubba

No 612, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: This paper analyses the impact of the emergence of new funds on the portfolio decisions of mutual fund managers who are evaluated on the basis of relative performance within a dynamic model. Recent theoretical literature has pointed to the inefficiencies in portfolio selection caused by relative performance evaluation of fund managers. We find that the on-going process of the creation of new funds, by posing an entry threat to the incumbent fund managers, greatly alleviates these inefficiencies. Hence the transitory market structure that characterises the mutual fund industry could explain why relative performance evaluation is widely in use.

Keywords: Relative performance evaluation; fund management industry; ranking objectives; family of funds. (search for similar items in EconPapers)
JEL-codes: G11 G24 L10 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://eprints.bbk.ac.uk/id/eprint/26931 First version, 2006 (application/pdf)

Related works:
Journal Article: Relative Performance, Risk and Entry in the Mutual Fund Industry (2006)
Working Paper: Relative Performance, Risk and Entry in the Mutual Fund Industry (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bbk:bbkefp:0612

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics Malet Street, London WC1E 7HX, UK.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).